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An arbitration agreement in an option contract to purchase a car is binding on the parties, despite the fact that the buyer did not purchase the car because he was not approved for financing, a federal court in Colorado held.
In Silva v. TT of Colorado Springs, Inc., No. 06-cv-00992-MEH-BNB, 2006 WL 3054308 (D. Colo. Oct. 26, 2006), Silva and TT signed a “Car Buyer’s Offer and Purchase Option Contract” (Option Agreement) relating to the sale of a Dodge Intrepid. The Option Agreement contained an arbitration clause and a provision stating that Silva would return the car if he failed to be approved for financing.
Silva was not approved for financing, and TT eventually repossessed the vehicle. However, Silva brought a variety of statutory and tort claims against TT, and TT petitioned the Court to compel arbitration of the dispute.
However, Silva argued that the arbitration clause was not valid because, since he never obtained financing, a contract was never formed. The Court disagreed and compelled arbitration of the dispute. Even though Silva’s offer to purchase the vehicle and the transaction that would have accompanied it never happened, the parties had still entered into a valid contract to govern the possibility of purchase. This valid contract required arbitration of all disputes related to or arising out of it, including Silva’s claims.
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